Whether Financial Statement

can be approved in

BM through Video Conferencing?

(10^th August 2023)

SHORT SUMMARY:

In this editorial, the author shall discuss the Quick bites on Whether Financial Statement can be approved in Board Meeting through Video Conferencing”.

As we have received numerous questions from our professional colleagues through WhatsApp groups “Gyan Gurukul”, inside this editorial we have attempted to clarify all those questions relating to ‘Approval of Financial Statement through VC'.

Meaning of “video conferencing or other audio visual means “audio- visual electronic communication facility employed which enables all the persons participating in a meeting to communicate concurrently with each other without an intermediary and to participate effectively in the meeting.

The Ministry has issued, The Companies (Meetings of Board and its Powers) Amendment, Rules 2021 passed on 15th June 2021. These Rules came into effect from 15th June 2021.

Section 173 of Companies Act, 2013 allows to hold Board Meeting through physical as well as video conferencing mode. However, Rule 4 restricts some matters (mentioned below) which can’t be discussed in Board Meeting through Video Conferencing.

Before amendment, if a Company wants to conduct the business mentioned under Rule 4 then physical presence of quorum was mandatory. If the physical quorum of directors was present, then other directors were allowed to attend the meeting through video conferencing.

1. Approval of financial statements;

2. Approval of matter relating to merger/amalgamation;

3. Approval of matter relating to takeover/acquisition;

4. Approval of prospectus for issue of shares.

Note: The Complete process for conducting of Board Meeting through video conferencing is prescribed under Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014 read with Secretarial Standard – 1.

In the Companies (Meetings of Board and its Powers) Rules, 2014, rule 4 shall be omitted.

(1) The following matters shall not be dealt with in any meeting held through video conferencing or other audio visual means.-

     i.        the approval of the annual financial statements;

   ii.        the approval of the Board’s report;

  iii.        the approval of the prospectus;

  iv.        the Audit Committee Meetings for consideration of accounts consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under subsection (1) of section 134 of the Act; and

    v.        the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

Effect of Amendment:

After above mentioned amendment of 15th June 2021, Companies can deal with any type of matter in the Board Meeting through Video Conferencing.

Note: there is no restriction on discussion on any matter in Board meeting through video conferencing.

Que 1: Whether the Financial Statement for F.Y. 2022-23 can be approved through video conferencing? (DG)

Que 2: Whether it is mandatory to keep recording of VC Board Meeting? (DG)

A.   Notice of Board Meeting:

The notice of the meeting shall be sent to all the directors in accordance with the provisions of sub-section (3) of section 173 of the Act as discussed below:

  I.    The notice of the meeting shall inform the Directors regarding the option available to them to participate through video conferencing mode. 

II.    The notice shall also contain all the necessary information to enable the directors to participate through video conferencing mode. Like: contact no. or e-mail address of the Chairman or any other person authorized by the Board, to whom the Director shall confirm in this regard. 

III.    Notice shall seek advance confirmation from the Directors as to whether they will participate through Electronic Mode in the Meeting. 

IV.    Director who intends to participate through video conferencing shall give prior intimation to Chairman of the Company (In the absence of intimation it shall be assumed that Director will attend in person). 

V.    Notice shall clearly mention the venue of the Meeting and it shall be the place where all the recordings of the proceedings at the Meeting would be made. 

B.   Duties of the Chairman of the Meeting: 

   I.  Safeguard the integrity of the meeting by ensuring sufficient security and identification procedures. 

 II.  Ensure availability of proper video conferencing or other audio visual equipment or facilities for providing transmission of the communications for effective participation of the directors and other authorized participants at the Board meeting. 

III.  To record proceedings and prepare the minutes of the meeting.

IV.  To store for safekeeping and marking the tape recording(s) or other electronic recording mechanism as part of the records of the company at least before the time of completion of audit of that particular year. 

 V.  To ensure that no person other than the concerned director are attending or have access to the proceedings of the meeting through video conferencing. 

VI.  To ensure that participants attending the meeting through audio visual means are able to hear and see the other participants clearly during the course of the meeting. 

C.   Conducting of Meeting: 

I.     At the commencement of the meeting, a Roll Call shall be taken by the Chairperson when every director participating through video conferencing or other audio visual means shall state, for the record, the following namely:- 

a)    Name;

b)   The location from where he is participating;

c)    That he has received the Agenda and all the relevant material for the meeting (Like: Draft Resolutions, Notes to Agenda etc) and

d)   That no one other than the concerned director is attending or having access to the proceedings of the meeting at the location mentioned in clause (b);

II.     After the roll call, the Chairperson shall confirm that the required quorum is complete. 

III.     A director participating in a meeting through video conferencing or other audio visual means shall be counted for the purpose of quorum. 

IV.     The Chairperson shall ensure that the required quorum is present throughout the meeting. 

V.     Every participant shall identify himself for the record before speaking on any item of business on the agenda. 

VI.     If a statement of a director in the meeting through video conferencing or other audio-visual means is interrupted or garbled, the Chairperson shall request for a repeat or reiteration by the Director. 

VII.     At the end of discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority.

D.  Minutes of the Board Meeting:

I.        The minutes shall disclose the followings:

a)    The particulars of the directors who attended the meeting through video conferencing or other audio-visual means.

b)   The location from where and the Agenda items in which he participated 

E.   Compliance after conclusion of Board Meeting:

   I.   The draft minutes of the meeting shall be circulated among all the directors within fifteen days of the meeting either in writing or in electronic mode as may be decided by the Board. 

 II.   Every director who attended the meeting, through video Conferencing shall confirm or give his comments in writing, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes, within seven days or some reasonable time as decided by the Board, after receipt of the draft minutes failing which his approval shall be presumed. 

III.   After completion of the meeting, the minutes shall be entered in the minute book. 

IV.   The minutes shall be signed by the Chairman. 

 V.   The attendance register shall be deemed to have been signed by the Directors participating through Electronic Mode, if their attendance is recorded by the Chairman or the Company Secretary in the Attendance Register and the Minutes of the Meeting.

F.   Preservations of Records: 

     I.     The recording of attendance of Meetings through Electronic Mode shall be preserved for a period of at least till the date of Audit and may be destroyed thereafter with the approval of the Board. 

   II.     Minutes of all Meetings shall be preserved permanently. 

 III.     Office copies of Notices, Agenda, Notes on Agenda and other related papers shall be preserved in good order in physical for as long as they remain current or for eight financial years, whichever is later and may be destroyed thereafter with the approval of the Board.

G.  Other Conditions: 

     I.     The scheduled venue of the meeting as set forth in the notice convening the meeting [**], shall be deemed to be the place of the said meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place. 

   II.     The statutory registers which are required to be placed in the Board meeting as per the provisions of the Act shall be placed at the scheduled venue of the meeting and where such registers are required to be signed by the directors, the same shall be deemed to have been signed by the directors participating through electronic mode, if they have given their consent to this effect and it is so recorded in the minutes of the meeting. 

 III.     From the commencement of the meeting and until the conclusion of such meeting, no person other than the Chairperson, Directors and any other person whose presence is required by the Board shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing without the permission of the Board. 

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com). 

Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information. 

IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION